Leasing vs owning your commercial property in Dubai

“Would it be smarter to rent a commercial property than purchasing it?” – it is a question everyone who decides to open a business in Dubai asks themselves at some point.

As an international trading hub, Dubai caters to all types of business ventures. Brimming with well-equipped state-of-the-art office spaces, Dubai offers numerous choices for those planning to expand their business activities in the Middle East.

When choosing the ideal commercial property to establish a business, the entrepreneurs should essentially consider the primary business activities of the enterprise. Dubai has multiple Free Trade Zones that help entrepreneurs establish and manage a business quite easily.

It should be noted that commercial property in the UAE is divided into several types according to the types of businesses. For instance, professional office space cannot be used for a retail business.

Deciding whether to purchase or lease a commercial property should primarily depend on the business type and the financial conditions of the entrepreneurs. Before finalizing the documents, the entrepreneurs must ensure that all the required documents including proof of ownership, compliance of the commercial property with the current plans, the status of the premises, and the necessary permits to occupy the property are available. However, these requirements might change according to the specific businesses and the location of the commercial property in Dubai.

Below we outline some of the fundamental aspects of leasing and owning commercial property as well as their possible advantages and disadvantages. Read on to find out the pros and cons of leasing and owning commercial property in Dubai.

PROS OF LEASING A COMMERCIAL PROPERTY

Purchasing a Property Requires Liquidity

Leasing requires a less amount of cash when compared to purchasing a commercial property. Leasing a commercial property rather than purchasing one leaves the investors with more capital to invest in other business operating costs.

Leasing is Attractive for Financing

Many small-scale or marginally profitable firms may find traditional financing sources like purchasing a commercial property rather expensive and difficult to attain. It is why leasing can be seen as an attractive source of financing. The cost of leasing usually falls below the cost of ownership and a landlord might be eager to sign a simple lease than transferring ownership.

Leasing Offers Stable and Predictable Costs

Unlike with ownership, leasing costs are easier to forecast when preparing a budget. Although some leases may end up costing several minor capital expenses to the buyer, most commercial lease structures out there help the buyer sidestep these unpredictable expenses like mechanical system replacement costs, structural repairs or random expenses like replacing the roof of the parking lot.

Leasing Looks Good for the Tax Benefits

The occupancy costs of leasing are fully deductible from the insurance. The owner of the property is supposed to depreciate the increase in the costs of the property. However, they cannot depreciate the value of the land.

Leasing is Flexible

A lease agreement comes with an expiration date where the buyers can re-evaluate their commercial property requirements. A leasing agreement also lets a lessee decide whether they wish to expand their business activities or relocate.

A Property at a Prime Location

Commercial property at prime locations across Dubai may already have been purchased. On the other hand, the available properties for purchase might be located away from the central locations in Dubai. Leasing allows the buyer to establish their business in a prime location in Dubai.

Focus on The Important Things

As with any other investment, purchasing a commercial property comes with multiple risks. These could include a decrease of the property value due to economic and market conditions, financing risks and unforeseen expenses related to maintenance and repair.

Leasing a property allows the tenants to focus on their primary business and not just its maintenance. Issues with property management can set the owner’s business back by several months.

 CONS OF LEASING A COMMERCIAL PROPERTY

Control of The Property

When leasing commercial property, the bitter truth is that the tenants have little to none control of the property that they are leasing. Due to the lack of control, these tenants may even be affected by parking restrictions, operational hours, the compatibility and the use of the commercial property.

On the other hand, securing the ownership of a commercial property can allow its owner to make decisions without a hassle or anyone’s interference.

No Appreciation of The Property or Equity Accumulation

Those who choose to lease instead of purchasing a commercial property do not have the opportunity to yield profits of the property value appreciation. Additionally, tenants of the property are not given the chance to yield any type of equity accumulation by reducing the property’s underlying financing.

That being said, purchasing a commercial property allows its owner to enjoy the profits of any asset value appreciation. Also, under an amortizing loan, the owner can also accumulate equity in the commercial property as the mortgage principal is paid off.

Leasing is more expensive than you think!

At a glance, the instalments for the leased property might look comparatively lesser compared to purchasing a property. However, at the end of the lease period, it could end up costing the tenants more than purchasing the commercial property.

Contractual Obligations of Leasing

Even though the business based at the leased commercial property faces losses, becomes less desirable or lacks liquidation, the tenants are obligated to pay the rent for the property. These contractual obligations come along with the leasing process and cannot be evaded even if the tenant does not have the financial capability to pay the rental obligations. In fact, the tenant will be charged with penalties if they missed out on their payments for the commercial property.

The Decreasing Salvage Value of The Property

When managing a commercial property on lease, it is natural to expect repairs and modifications in the business space. However, this also means that any modifications done to the property will eventually be handed over to the owner of the property at the end of the lease period. Alternatively, the owner of the commercial property might require the tenant to remove all the modifications done during the leasing period.

PROS OF PURCHASING A COMMERCIAL PROPERTY

Enjoy the Appreciation of The Property as an Owner

All in all, the real estate industry in Dubai has been enjoying a steady boom. Even after the toughest of the economic conditions, Dubai has been able to recover its real estate market to its former prestige.

A tenant is not able to enjoy the appreciation of the property value. The owner of the property will instead be enjoyed by the owner of the commercial property. Although the value of the property may fluctuate over the years, once the total value of the commercial property improves and/or stabilizes, the owner can yield the added property value by putting the property back on the market.

The Property Could Pay For Itself!

Just because you own a commercial property does not mean that you have to occupy it all by yourself. Commercial property can be used as a mode of income to those who can afford to allocate some space to a tenant for a leasing agreement. This will provide the owner with an additional source of income which can be used to pay the mortgage, invest or even distribute.

Property Ownership Attracts Tax Benefits

Ownership of commercial property comes with a range of benefits and depreciation deductions to shield the owner of the property from income taxes. Additionally, once the property is put back on the market, the owner is taxed at a lower marginal tax rate than his or her usual income.

CONS OF PURCHASING A COMMERCIAL PROPERTY

Purchasing a Commercial Property in Dubai Takes Time!

As with any other expensive investment, purchasing property in Dubai takes a considerable amount of time – especially due to the substantial transactional costs involved in the acquisition and deposition process of the property.

These costs can even out the long-term benefits of owning a commercial property or nullify the benefits of appreciation of the property for at least a short period.

The Initial Investment Can Be Massive!

In the majority of the cases, the commercial property requires an initial payment of at least 20% to 30% of the total value of the property. Considering the real estate market in Dubai, this value can be too much to bear for the investors. This money can rather be invested in the owner’s other business activities.

A Commercial Property Can Be Difficult to Manage

Issues regarding commercial property management are usually complex in nature. These complications range among legal, compliance, health and safety concerns. Managing contractors can also be expensive and distracting. It is an additional burden for the owner of the commercial property attempting to run a business.

Difficult Financing Covenants and limitations

Commercial property purchasing loans require personal as well as corporate guarantees. The long list of requirements also involves some type of liquidity such as a minimum deposit balance with the lender.

On the other hand, non-recourse fixed-rate financing usually comes along with other demands, which includes breakup fee or yield maintenance if the loan is retired prematurely.

 
 

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Dubai Commercial Property Market August 2025 Insights

With offices leading transaction volumes and warehouses commanding premium valuations, August 2025 highlighted the diversification and maturity of Dubai’s commercial property landscape. Here’s a snapshot of the latest trends shaping the market: 1. DLD Commercial Sales Total Transactions: 1,013 Total Value: AED 9 BillionDespite August traditionally being a slower month due to seasonal travel, the robust transaction levels demonstrate enduring investor confidence in Dubai’s commercial real estate.2. Office Market Insights Transactions: 321 Total Value: AED 894 Million Average Price: AED 1,871 per sq. ft. Top 3 Office Sales Locations: 1. Business Bay 102 transactions | AED 2,153 per sq. ft. Business Bay recorded the highest number of transactions in August, underscoring its role as Dubai’s central business district. The higher average price per sq. ft. compared to JLT reflects its premium positioning, Grade A office supply, and appeal to corporates seeking proximity to Downtown Dubai. Its strong performance signals sustained appetite for centrally located commercial assets. 2. Jumeirah Lake Towers (JLT) 85 transactions | AED 1,878 per sq. ft. JLT continues to stand out as one of Dubai’s most liquid office markets. Its competitive pricing, business-friendly infrastructure and proximity to key transport links make it an attractive hub for both SMEs and international firms. The community’s consistent transaction volume shows strong occupier demand and ongoing investor confidence. 3. Jumeirah Village Circle (JVC) 32 transactions | AED 1,497 per sq. ft. While smaller in volume, JVC’s activity highlights the growing demand for decentralised office spaces. Its relatively lower average price per sq. ft. positions it as an emerging hotspot for cost-conscious businesses and investors looking for yield potential in a rapidly developing community. Together, these three locations capture Dubai’s diverse commercial landscape, balancing established hubs with emerging growth corridors.3. Retail Market Insights Transactions: 119 Total Value: AED 311 Million Average Price: AED 2,521 per sq. ft. Top 3 Retail Sales Locations and Average Selling Prices: Majan: AED 2,588 per sq. ft. International City: AED 1,050 per sq. ft. Business Bay: AED 3,681 per sq. ft. Retail demand remains diverse, with high-value deals in both established and emerging communities.4. CRC Commercial Sales Performance CRC’s August results highlight the shifting dynamics of Dubai’s commercial real estate market, particularly within the office and warehouse sectors. Average Office Sale Price: AED 3.01 Million Average Warehouse Sale Price: AED 17.34 Million These figures reflect not just transactional strength but also the quality of assets transacted. Offices remain a steady investment class, while warehouses command premium pricing as demand intensifies across logistics, e-commerce and industrial occupiers. Ashley Sonnenberger, Manager of Industrial and Logistics at CRC touched on this: “What we’re seeing now is that sellers recognise the momentum in the industrial market and are moving to capitalise on it. With limited availability of stock, this scarcity is driving stronger valuations and creating a more competitive landscape for buyers.”Top CRC Office Sales Communities: Jumeirah Lake Towers (JLT) Business Bay DIFC At CRC, we believe this illustrates how Dubai’s office market is not “one-size-fits-all” but segmented by investor profile: value-driven buyers gravitate towards JLT, corporates and end-users anchor Business Bay, while institutional capital focuses on DIFC. Warehouses, meanwhile, are fast emerging as a strategic investment category, driven by long-term macro shifts in supply chain resilience and digital trade. In an environment where asset selection is critical, CRC’s transactional performance signals where capital is flowing and more importantly, where opportunities are likely to emerge next.5. CRC Commercial Leasing Performance Average Office Lease Price: AED 670K Average Retail Lease Price: AED 705K Average Warehouse Lease Price: AED 659K Top CRC Office Leasing Communities: Jumeirah Lake Towers (JLT) Sheikh Zayed Road Barsha Heights (Tecom) Rental Cheque Preferences: 4 Cheques: 63% 2 Cheques: 23% 1 Cheque: 14%The dominance of 4-cheque payment structures, representing nearly two-thirds of CRC’s leasing activity for August 2025, reflects a clear market shift toward greater tenant flexibility and financial accessibility. Businesses today are more cashflow-conscious, preferring to spread rental commitments across the year rather than locking into large upfront payments. Meanwhile, 2-cheque agreements (23%) remain popular with tenants balancing flexibility with negotiating leverage, landlords often offer slightly more favourable rates for fewer instalments. At the other end of the spectrum, 1-cheque payments (14%) now represent a smaller share of the market. While traditionally preferred by landlords for immediate liquidity and reduced risk, this method is increasingly less common in the current environment. However, it still appeals in high-demand communities or for prime assets, where landlords retain stronger bargaining power.Key Takeaways August’s figures reinforce a critical takeaway: Dubai’s commercial property market is no longer defined by short-term seasonality but by long-term fundamentals. With over AED 9 billion transacted, strong liquidity in offices and premium pricing in warehouses and retail, the market continues to demonstrate its depth and adaptability. For investors, this signals that opportunities exist across three distinct plays: Liquidity in hubs like JLT for consistent, steady returns. Premium positioning in Business Bay and DIFC, where prestige and centrality drive demand. Emerging value in decentralised communities like JVC, offering room for capital appreciation. For landlords and occupiers, the shift toward flexible leasing structures and multi-cheque payments reflects a maturing, tenant-centric environment, one that aligns Dubai with global real estate norms while retaining its competitive edge. At CRC, we view these trends not just as numbers on a chart, but as a roadmap for decision-making. The interplay of investor confidence, evolving tenant expectations and Dubai’s strategic positioning will continue to define where capital flows and where businesses choose to establish their footprint.

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Top 7 Retail & F&B Investment Trends in Dubai to Watch in 2025

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How to Navigate Madhmoun: A 2025 Step-by-Step Guide for Property Owners and Brokers in Abu Dhabi

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Is Commercial Real Estate in Dubai a Safe Investment in 2025? Here’s What the Data Says

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